Foreclosure activity jumped in January, according to a report released by a leading lender processing service. The spike seems to suggest that the foreclosure backlog is beginning to clear. If so, that's a trend likely to continue, many experts say, in the wake of a recent settlement that has clarified acceptable foreclosure practices for the country's largest servicers.
Foreclosure starts and foreclosure sales rose by 28 and 29 percent respectively in January, LPS' January Mortgage Monitor report says. Forty-seven percent of all the foreclosure starts were repeat foreclosures, marking an all-time high, LPS says. Housing experts generally consider an increase in foreclosure activity to be a good thing for the current housing market because the clogged foreclosure pipeline is frustrating a full price recovery.
The January spike predates the national settlement reached in early February between attorneys general, federal agencies and five major mortgage servicers over foreclosure abuses, which at first would seem to suggest that the increase is not attributable to the deal. At the same time, however, says Daren Blomquist, vice president of RealtyTrac, banks may have ramped up foreclosures at the end of 2011 and in January 2012 "in anticipation of the settlement, feeling confident that their documentation and paperwork [was] sufficient."
"Before the settlement was finalized, they already knew what was going to be required of them," he said.
Either way, now that the standards are fully established, experts say the rise in foreclosure activity is likely to continue.
"The settlement sets forth clear guidelines for lenders and servicers to follow when foreclosing, which should allow them to push through some of the delayed foreclosures from last year," Moore said last month.
A sharp disparity remains between states that differ in the way foreclosures are handled under the law, the report also found. The LPS report says that foreclosure sales -- as a percentage of foreclosure inventory -- are three times as high in non-judicial states as in judicial states.
In judicial states, judges must sign off on foreclosures, significantly complicating the process. The most severe backlogs of foreclosures are in judicial states, as short-staffed courts -- now more cautious in the wake of the robo-signing crisis -- scramble to handle mountains of foreclosure filings.
Taking Inventory: Foreclosure Finds Across the U.S.
Foreclosure Starts and Sales Spiked in January, Report Says
Location: Trenton, N.J.
Average Foreclosure Discount: 67.8 percent
Sq. Ft.: N/A
Trenton ranks No. 1 on RealtyTrac's list of cities with the steepest foreclosure discounts. This single-family, whose price was slashed recently, represents one of the killer deals you can find in the city.
Dating back to the 1960s, this Cape Cod-style home offers three bedrooms and two baths. Judging by the average foreclosure discount of New Jersey, the home could be running as much as $150,000 below market value.
Average Foreclosure Discount: 49.67 percent
Price: $3.75 million
Sq. Ft.: 22,000
Foreclosed homes in Atlanta are selling for a staggering 50 percent off, according to data from RealtyTrac. This vacant Mediterranean mansion offers a rather excessive four kitchens along with amenities that include a home theater, pool, spa, steam room and elevator.
Average Foreclosure Discount: 48.14 percent
Price: $4.29 million
Sq. Ft.: 12,129
It may be hard to believe that $4.29 million is a below-market price, but given that this stucco Mediterranean is bank-owned and Houston's foreclosure discount approaches 50 percent, odds are that the home could be quite a deal for a well-heeled buyer.
Location: St. Louis
Average Foreclosure Discount: 54.61 percent
Sq. Ft.: 1,342
This brick-built home, which dates back to 1930, probably hit the market at a reduced price to begin with, but now is running even lower, having just undergone a price cut. The home offers stained-glass windows and wood flooring along with a spruced-up kitchen.
Pictured here is the home's updated kitchen. The residence is even more of a deal if you factor in its purported HomePath Mortgage status. That means if you've got the right credit, you could snatch it for as little as 3 percent down.
Location: Lansing, Mich.
Average Foreclosure Discount: 44.31 percent
Sq. Ft.: 2,228
Squeezed into a condo community, this historic home stands out in the neighborhood because of its stately portico. The home has a long residential tradition, but could go commercial if the buyer so chooses: The house can serve as an office, according to the listing.
Location: Grand Rapids, Mich.
Average Foreclosure Discount: 43.45 percent
Sq. Ft.: 4,339
You get a lot of bang for your buck if you buy this four-bedroom contemporary. Located on a cul-de-sac, the home spans a generous 4,339 feet and offers a three-car garage. At under $300,000, that makes it an affordable luxury residence.
Location: Flint, Mich.
Average Foreclosure Discount: 21.55 percent
Sq. Ft.: N/A
Purchase a foreclosed home in Flint and you're likely to enjoy the benefit of more than 20 percent off. While the city's foreclosure inventory doesn't offer deals quite as striking as those found in some other cities wracked by the housing crisis, the town's average foreclosed-home price still falls far, far below the national median (which hovers above $200,000). Flint's average foreclosed-home price is just $60,578. This well-landscaped home demonstrates how far just $110,000 gets you.
Location: Easton, Pa.
Average Foreclosure Discount: 41.17 percent
Sq. Ft.: 1,556
Alright! A listing description that levels with you. "This is a property that needs some work," it states. The home is not without its virtues, however: It offers ample space, three bedrooms and an attic. Furthermore, buyers can acquire 3 percent buyer's assistance if they make an offer by the 31st of this month.
One thing buyers should watch out for if they think about shelling out for these digs is that, as with many other foreclosures, there is no seller disclosure for buyers interested in this home. That means, unless you pay for a thorough inspection, you could discover hidden flaws after purchasing the place.
Pictured here is the home's open dining-kitchen area. The place seems to be in pretty good shape for a foreclosed home. Many fall into poor condition, succumbing to insect infestations or other symptoms of neglect.